First, do we know that having women on boards is definitely a good thing?
There has been plenty of research out there about the impact of women on boards. The evidence isn't always very rigorous methodologically, and the results tend to be a bit mixed. Interpreting the evidence is also tricky because the issues are so bound up with attitudes and policies - it's hard sometimes to dis-aggregate the impact of women on boards from general trends in social attitudes.
Post and Byron (2015) conducted a meta-analysis (140 studies over 5 countries involving over 90,000 firms) and reached some interesting conclusions.
1) having a mixed gender board seems to make the board more efficient and effective at it basic job of providing strong governance to the organisation. Having women on boards is positively associated with accounting returns (especially in countries with strong shareholder protection which means that board members are held accountable for their decisions), monitoring (women seem to make stricter ethical judgements and are more risk-averse) and strategy involvement (this is corroborated by Nielsen & Huse, 2010, in their study in Noway).
2.) having a mixed gender board is not correlated with market performance overall (although there is a positive correlation with market performance in countries where there is gender parity, and a negative one in countries where there is little gender parity - the authors' assumption is that this is linked to attitudes about women). This finding was corroborated by another meta-analysis the same year (Pletzer et al., 2015)
Terjesen, Sealy & Singh, (2010) conducted a systematic literature review. They found empirical papers which came to fairly similar conclusions.
1) having women on boards leads to better governance performance (eg Adams & Ferreria, 2007; Singh & Vinnicombe, 2014) and greater board independence (Fondas & Sassalos, 2000)
2) They found mixed results about the financial performance (eg Catylist, 2007 which showed a positive correlation and Catylist, 2014 which showed a negative one).
3) They examined 'trickle down' impact of having more women on boards - the degree to which an increase in gender diversity at board level led to greater gender diversity further down the organisation. They found a little bit of positive evidence that mixed boards are positively linked with the number of women in senior roles in the organisation (Billimoria, 2006, looking at firms in the US). This study was time lagged ie compared the number of senior women before and after the addition of women to the board, so can offer some hint of causality.
Overall, women on boards seems to have a positive impact on governance and possibly some broader impact on better gender representation. But the studies included in these papers above incorporated evidence from companies who had chosen, voluntarily, to select female board-members. You could argue that those companies may have a more inclusive culture which has an impact on the outcomes. Are the same outcomes seen in firms who are mandated to include women on their boards?
What about mandated quotas of women on boards: what impact does that have?
The evidence for the impact of mandatory quotas is limited, conflicting and not always methodologically rigorous. Norway was one of the early adopters (initial legislation in 2002), with the highest proportion mandated (40%) and the strictest penalties (dissolution). Perhaps for these reasons, there seems to have been far more written about the situation in Norway than anywhere else. But as we know, countries and cultures vary tremendously, so the findings in Norway aren't necessarily generalisable to other countries. Compounding this, is the fact that the financial crash happened in Norway during the time of the introduction of mandatory quotas, making it difficult to be sure whether the impact seen in before-and-after studies is traceable to the reforms or if it is more influenced by the economic situation (Hughes, Paxton & Krook, 2017).
There are however some consistent messages from the literature.
1.) Firm Performance
A key reason that firms might want to increase the representation of women on boards is to increase overall firm performance. Two studies have identified that more diverse boards lead to lower profits, in the short term. Matsa and Miller (2013) compared firms with mandated quotas in Norway to those in the rest of Scandinavia, and found that women on boards leads to fewer job losses and therefore more labour costs, which in turn leads to loss of profit. The authors stress then that this is not a sign that the firms are under-performing, but an indication that they may be pursuing a long term strategy. This reflects the findings of Adams and Ferreria's 2009 survey, of women on boards in the US, which showed that women board members were more likely to prioritise long term strategies. Ahern and Dittman (2010) also found a decrease in short term profits after the reforms in Norway, (measuring before-and-after data) but attributed it to the nature of the female board members. In their analysis, they identified that the female board members tended to be younger and less experienced than their male counterparts. When these factors were controlled for, the negative impact of women on profits disappeared (although see Nygaard 2011 for a critique of Ahern and Dittman's sampling process). Eckbo, Nygaard and Thorburn (2016) used what Hughes et al.(2017) suggest is a more methodologically rigorous approach and extended the period of study until 2013, and found no statistically significant impact on firm value or profitability.
2.) Trickle-down effect
One reason for wanting to see more women at the top of organisations is the positive trickle down impact it may have on other women. One oft-cited reason for the under-representation of women in senior roles is the lack of visible role models: a quota system could offer a way to address this. But the evidence is not clear cut. Bertrand et al. (2014), (again looking at Norway) found no significant impact on representation of women in other senior position, no impact on other women who were equally well-qualified non-board members and no significant (although there was a small n-s impact) on the gender wage gap. Looking beyond the organisations themselves, Bertrand et al. also found no impact on the number of women enrolling on business courses.
Wang and Kelan (2013) compared Norwegian firms before and after the reforms and found that the diverse boards had a positive impact on the number of female board chairs and the number of female CEOs in the Norway. It seems strange that these two studies looking at the same population found contradictory evidence. Their samples were different, and this could go some way to explaining the inconsistent findings. Wang and Kelan used the companies in Norway who were listed on the stock exchange (n=224) and Bertrand et al. used data on individuals in the country from the Norwegian Registry Data.
3.) Better boards
A number of studies have looked at the impact of the quotas on the nature of the boards themselves. In the findings of a qualitative study Elstad and Ladegard (2010) found that the women on boards felt better treated after the reforms were introduced, finding that they had more access to information, more influence and more social interaction with other board members than they had before. Bertrand et al. (2014) found that the average qualifications of the women on boards increased and the gender pay gap decreased after the reform. Adams and Fererria found that diverse boards in the US (no mandatory quotas) were stronger monitors, but despite these findings, the authors did not advocate for mandated quotas, and this is because of the somewhat complex relationship between governance and firm performance. Their findings seemed to indicate that stronger monitoring is linked to better firm performance for organisations who have otherwise weak governance (and therefore a diverse board would add value in this context) but for organisations who already have strong governance, the addition of a diverse workforce might lead to over-monitoring and therefore weaken performance.
4.) The impact of the mandatory quotas varies with the design of the quota system
There is some evidence that the design of the quota system makes a difference to the overall impact. Konrad and Kramer (2005) suggest that there need to be 3 or more women on a board to see any impact at all. This then may have an impact on the empirical evidence, which may include data from boards with just 1 or 2 women. There was also some interesting evidence from Norway which showed that a significant proportion of firms (28%, according to Nygaard, 2011) either shifted from being PLCs (who are obliged to meet the quotas) to LTDs (who are not), after the reforms were announced, or moved their headquarters to the UK (where there are is no such legislation). Sojo et al., (2016) found evidence that stronger enforcement methods were linked with higher female representation - so having strict penalties for non-compliance did make a difference to the number of women on boards. This may not sound terribly surprising, but does offer some evidence that the lack of women on boards elsewhere is not a consequence of women's lack of interest: when firms want to, they can find women who are keen to take on these roles.
So what is our conclusion? It's probably too soon to call. There need to be more methodologically robust studies examining the longer term outcomes and more studies from countries other than Norway. The early indications seem to be that the outcomes from quotas are similar to the impact in organisations who have chosen to select women onto boards voluntarily. There doesn't seem to be a dearth of women interested in these positions, and there seems to be some sense that women on the boards increases the strength of board governance. The impact on profits and on gender representation are unclear, but the mandatory quotas don't appear to have harmed either. It seems then that the quotas don't harm; might help; are definitely fairer; but haven't proved to be a magic bullet.
References
Adams, R. & Ferreira, D. (2009). Women in the Boardroom and their Impact on Governance and Performance. Journal of Financial Economics, 94(2): 291-309.
Ahern, K. R., & Dittmar, A. K. (2012). The changing of the boards: The impact on firm valuation of mandated female board representation. The Quarterly Journal of Economics, 127(1), 137-197.
Bertrand, M., Black, S. E., Jensen, S., & Lleras-Muney, A. (2014). Breaking the glass ceiling? The effect of board quotas on female labor market outcomes in Norway. The Review of Economic Studies.
Bilimoria, D. (2006). The Relationship Between Women Corporate Directors and Women Corporate Officers. Journal of Managerial Issues, 18(1): 47-61.
Brammer et al., 2007 suggest that having women on boards improves governance and makes sure that the board better represents the customers - making it more likely to lead to a commercial advantage.
Bøhren, Ø., & Staubo, S. (2014). Does mandatory gender balance work? Changing organizational form to avoid board upheaval. Journal of Corporate Finance, 28, 152-168.
Bøhren, Ø., & Staubo, S. (2016). Mandatory gender balance and board independence. European Financial Management, 22(1), 3-30.
Dale-Olsen, H., Schøne, P., & Verner, M. (2013). Diversity among Norwegian boards of directors: Does a quota for women improve firm performance?. Feminist Economics, 19(4), 110-135.
Eckbo, B. Espen and Nygaard, Knut and Thorburn, Karin S., (2016) Does Gender-Balancing the Board Reduce Firm Value? (March 2016). CEPR Discussion Paper No. DP11176. Available at SSRN: https://ssrn.com/abstract=2766471
Hughes, M. M., Paxton, P., & Krook, M. L. (2017). Gender quotas for legislatures and corporate boards. Annual Review of Sociology, 43, 331-352.
Kogut, B., Colomer, J., & Belinky, M. (2014). Structural equality at the top of the corporation: Mandated quotas for women directors. Strategic Management Journal, 35(6), 891-902.
2013. "A Female Style in Corporate Leadership? Evidence from Quotas."American Economic Journal: Applied Economics, 5 (3): 136-69.
Nielsen, S., & Huse, M. (2010). The contribution of women on boards of directors: Going beyond the surface. Corporate governance: An international review, 18(2), 136-148.
Pande, R., & Ford, D. (2012). Gender quotas and female leadership.World Bank Report
Post, C., & Byron, K. (2015). Women on boards and firm financial performance: A meta-analysis. Academy of Management Journal, 58(5), 1546-1571.
Smith, N. (2014). Quota regulations of gender composition on boards of directors. CESifo DICE Report, 12(2), 42-48. (Report).
Sojo, V. E., Wood, R. E., Wood, S. A., & Wheeler, M. A. (2016). Reporting requirements, targets, and quotas for women in leadership. The Leadership Quarterly, 27(3), 519-536.
Terjesen, S., & Sealy, R. (2016). Board gender quotas: Exploring ethical tensions from a multi-theoretical perspective. Business Ethics Quarterly, 26(1), 23-65.
Terjesen, S., Sealy, R., & Singh, V. (2009). Women directors on corporate boards: A review and research agenda. Corporate governance: an international review, 17(3), 320-337.
Wang, M., & Kelan, E. (2013). The gender quota and female leadership: Effects of the Norwegian gender quota on board chairs and CEOs. Journal of business ethics, 117(3), 449-466.
